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Working Paper
International cross-listing, firm performance and top management turnover: a test of the bonding hypothesis
We examine a primary outcome of corporate governance, the ability to identify and terminate poorly performing CEOs, to test the effectiveness of U.S. investor protections in improving the corporate governance of cross-listed firms. We find that firms from weak investor protection regimes that are cross-listed on a major U.S. exchange are more likely to terminate poorly performing CEOs than non-cross-listed firms. Cross-listings on exchanges that do not require the adoption of the most stringent investor protections (OTC, private placements and London listings) are not associated with a higher ...
Working Paper
The rising tide lifts some interest rates: climate change, natural disasters, and loan pricing
We investigate how corporate loan costs are affected by climate change-related natural disasters. We construct granular measures of borrowers’ exposure to natural disasters and then disentangle the direct effects of disasters from the effects of lenders updating their beliefs about the impact of future disasters. Following a climate change-related disaster, spreads on loans of at-risk, yet unaffected borrowers, spike and are amplified when attention to climate change is high. Weaker borrowers with the most extreme exposure to these disasters suffer the highest increase in spreads. ...
Working Paper
Friends or foes? The stock price impact of sovereign wealth fund investments and the price of keeping secrets
This paper examines the stock price impact of 163 announcements of Sovereign Wealth Fund (SWF) investments. We document an average positive risk-adjusted return of 2.1 percent for target firms during two days surrounding SWF acquisition announcements. The announcement effect is both statistically and economically significant. A multivariate analysis shows that the degree of transparency of SWF activities is an important determinant of the market reaction, and both the SWF and the existing shareholders of the target firm benefit from improved SWF disclosure. In addition, target firms' ...
Working Paper
Currency hedging and corporate governance: a cross-country analysis
Corporate governance can provide mechanisms to effectively monitor the use of derivatives. Using a sample of firms from 34 countries over the period 1990 to 1999, I find that firms with strong governance use currency derivatives for value-maximizing reasons as established by theory. On the other hand, firms with weak governance use such derivatives mostly for managerial self-interests and selective hedging. These results are robust to using a sample of US firms, the use of foreign denominated debt as an alternative strategy to hedge currency risk, selection bias, and a possible endogeneity ...
Working Paper
Escape from New York: the market impact of SEC Rule 12h-6
We examine the stock market impact of SEC Rule 12h-6 which eased the ability of foreign firms to deregister with the SEC and as a result terminate their U.S. disclosure obligations under the 1934 Securities Exchange Act. We document that the market reacted negatively to the ability of firms from weak disclosure and governance countries to more easily opt out of the stringent U.S. reporting and legal environment. Our findings suggest that shareholders of non-U.S firms place significant value on U.S. securities regulations, especially when the home country investor protections are weak.
Conference Paper
Escape from New York: the market impact of loosening disclosure requirements
We examine the first significant deregulation of U.S. disclosure requirements since the passage of the 1933/1934 Exchange and Securities Acts: the 2007 SEC Rule 12h-6. Rule 12h-6 has made it easier for foreign firms to deregister with the SEC and thereby terminate their U.S. disclosure obligations. We document that the market reacted negatively to the announcement by the SEC that firms from countries with weak disclosure and governance regimes could more easily opt out of the stringent U.S. reporting and legal environment. We also document that since the rule?s passage, an unprecedented ...
Working Paper
External governance and debt agency costs of family firms
We investigate the impact of family blockholders on the firm's debt agency costs under different investor protection environments. On one hand, families--through their undiversified investments, inter-generation presence, and reputation concerns--can mitigate debt agency costs. On the other hand, families--through their unique power position that can lead to private benefits extraction and higher bankruptcy risk--can exacerbate debt agency costs. The actual impact can go either way and what matters should be the creditors' protection environment. Using international bond issues from 1995 to ...
Working Paper
Say on pay laws, executive compensation, CEO pay slice, and firm value around the world
This paper examines the effects of say on pay (SoP) laws on CEO compensation, the portion of top management pay captured by CEOs, and firm valuation. Using a large cross-country sample of about 103,000 firm-year observations from 39 countries, we document that compared to our control group of firms, SoP laws are associated with 1) a lower level of CEO compensation, which partly results from lower CEO compensation growth rates and is related to CEO power, 2) a higher pay for performance sensitivity suggesting that SoP laws have the greatest effects on firms with poor performance, 3) a lower ...